Cuts to social programs and higher debt could drive crypto demand as a hedge.
On July 4, President Donald Trump signed the tax bill, the so-called One Big Beautiful Bill Act, which was a crucial moment in the evolution of the U.S. economy and the crypto markets. The 940-page law, narrowly approved by Congress, extends tax cuts to individuals and small businesses, creates new tax exemptions and makes deep spending cuts.
On the South Lawn of the White House, there was a signing ceremony that was followed by military flyovers. There were also Republican politicians and military leaders present throughout the event. Trump explained the bill by saying that it was the most popular bill ever signed in the history of our country, which focused on economic growth and working Americans. This will spur an unprecedented growth in the economy and pick up this nation of the hard-working citizens who make this country go, he said citing factory workers, farmers and service industry workers.
The bill provisions are permanent extension of earlier tax-cuts, abolition of estate tax in family farms and small businesses, temporary tax-break on tips, and overtime, Social Security, and auto loan interest. It also spends 150 billion dollars on defense and border security, reducing Medicaid and food welfare programs.
The new tax law is likely to have an indirect impact on the crypto market. The legislation itself lacks crypto-specific tax deductions, but it may affect investments in digital assets due to the overall revisions to the economy. The rise in consumer spending due to increased tax exemptions and overtime relief can create a surge in the demand of alternative assets such as Bitcoin.
The rapid growth of federal debt and the cuts in social programs have brought the issue of market instability into question, which is caused by the legislation. In the past, these situations have resulted in a rise in demand for crypto as an economic-uncertainty hedge. The polarization of the bill and thus the uncertainty of the fiscal policy can make both institutional and retail investors consider Bitcoin as a store of value.
Source – snippet from Harrisx survey
A recent survey shows that more than 70 per cent of crypto investors in the United States are optimistic about the current strategy that Trump has adopted towards digital asset policy. The pro-business approach of the bill, such as less regulatory interest in green finance, can relieve crypto companies even more.
Source – CMC
Although there are no specific crypto taxation measures, the market has already reacted by showing more volatility. The price and the market capitalization of Bitcoin have been soaring over the last few months currently trading at $108,967 with traders commenting on politically themed tokens and hoping that institutional players will add more money to the cryptocurrency.
The passage of the bill is a follow-up of the historical patterns in which major changes in U.S. policies have occurred before major cryptocurrencies experienced volatility. Tax changes in 2017, such as reforms, were one example of sources of risk sentiment and prices in both Bitcoin and Ethereum. The new law will presumably have the same impact, and the expansion of the market will most likely happen again as the interest of institutions increases.
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